Alabama VA Home Loans:
Eligibility, Getting Started and FAQs

At 1st United Mortgage, it’s our job and honor to help veterans, active military members, & their families with the American dream of buying a home.

Thanks to the VA Home Loan Program, that process is easier for qualified applicants. In fact, it is possible to purchase a home with no down payment, low interest rates and even low credit scores. We have a team of experienced staff members trained and ready to help clients with eligibility, document requirements, and answering questions about Alabama’s state specific benefits. Our highly trained VA home loan specialists work hard to keep your mortgage process stress-free and simple.

Some of our clients are surprised to learn that a 620 credit score is not necessary for VA loan approval. With 1st United Mortgage, we can approve loans with credit scores starting at 560. If you do not yet qualify, we also have a credit score rehabilitation program that can help you get there.

VA Mortgage Options in Alablama

There are five active military bases in Alabama and 10 of the top US Defense companies have operations in the state. With so much military influence on the economy, it’s no wonder Alabama is a popular place to purchase a home with a VA Loan.

We also offer many other loan options for those not eligible for a VA loan, including FHA & other conventional loan options.

Military in Alabama

Alabama has always had a strong military presence, with three Army bases, a Coast Guard and the widely recognized Maxwell Gunter Air Force Base. With mild winters and plenty of job opportunities for veterans, Alabama is one of the top states for military retirees. It’s especially welcoming for small business owners, with an estimate of approximately 11% of Alabama’s businesses owned by veterans.

Here is a list of some the places we serve most often with VA loans in Alabama. Click the name to learn more about each one.

Birmingham

Birmingham is the most populous city in Alabama thanks to a booming economy and thriving urban scene. Anniston Army Depot Base is roughly one hour away from the city and employs almost as many civilians as military members.

Montgomery

Montgomery is the second largest city in Alabama as well as the state capital. It’s home to Maxwell Gunter Air Force Base, which is known today for training some of the world’s best pilots.

Mobile

The Gulf Coast city of Mobile is found in the southern part of the state of Alabama at the head of Mobile Bay. The city is home to the Coast Guard’s Aviation Training Center, whose mission is to produce mission ready aircrews and develop aviation capabilities.

Tuscaloosa

Tuscaloosa is part of the Western portion of Alabama and known for being a town of “just right size.” In other words, it offers the benefits of a big city but maintains a a small town charm that residents cherish.

Huntsville

Huntsville is in the northern part of Alabama and the third largest city in the state. The city is also home to Redstone Arsenal Army Base and the US Space and Rocket Center. The city has a large engineering, defense and aerospace economy and an emerging tech industry.

Dothan

Dothan is considered one of Alabama’s most progressive cities. With low housing costs, low taxes and a strong economy, it’s a popular place for homeownership among units from Fort Rucker Army Base.

Auburn

Auburn is one of Alabama’s most widely recognized cities thanks to Auburn University. This college town offers a tight-knit community feel with plenty of job opportunities beyond the university, making it an extremely popular place to move.

Madison

Madison is a smaller town that’s really part of Huntsville. The town is quickly growing thanks to a family friendly atmosphere and top-nothc school system.

Alabama VA Loan FAQs

Eligibility

VA Loan Eligibility

There’s a reason so many veterans and active duty borrowers chose the VA loan program. The program provides qualified home buyers the ability to purchase a home with no money down. That’s an incredible benefit that opens the doors of homeownership to thousands of people who might otherwise struggle with financing.

Other VA loans features include:

No private mortgage insurance or PMI

Flexible credit and income requirements

Consistently lower rates than other loan products

Your VA loan entitlement is a hard-earned benefit and we are here to help you utilize it. With unmatched buying power and flexibility, the VA loan program represents the simplest and most powerful path to homeownership for many veterans, service members and military families.

What is the VA Loan entitlement?

Veterans, service members and others who qualify have what is called an entitlement. This entitlement is essentially a promise from the Department of Veterans Affairs, who will provide a financial guaranty on mortgages issued by approved lenders. That also means the VA doesn’t issue home loans. Instead, it guarantees a portion of each. That guaranty is important to lenders and helps borrowers who might otherwise be unable to secure financing. Having a VA entitlement means you have a financial guaranty from the Department of Veterans Affairs.

Am I eligible as a spouse of a deceased veteran?

Some non-military personnel, including both unmarried and remarried spouses are eligible for the VA home loan program. These include:

An unmarried spouse whose veteran died on active duty or because of a disability connected to his or her service

Surviving spouses who obtained a VA loan with the veteran before his or her death can obtain a VA Interest Rate Reduction Refinance Loan, better known as a VA Streamline refinance.

Surviving spouses who remarried upon or after turning age 57 and on or after December 16, 2003, may be eligible for a VA home loan. Surviving spouses who remarried before that date are no longer eligible to participate.

The spouse of an active duty member who is listed as missing in action (MIA) or a prisoner of war (POW) for at least 90 days is eligible for one-time use of the VA home loan benefit.

How can I get my Certificate of Eligibility?

The COE, or Certificate of Eligibility, is a formal VA document that certifies what entitlement, if any, a military member has for a VA home loan. The Certificate of Eligibility is a crucial for the process and is the way to verify a veteran’s eligibility and entitlement to the benefit. Prospective borrowers cannot complete the lending process without a COE. Veterans can contact the VA directly to obtain their Certificate of Eligibility, but it may take a few weeks to receive it. At 1st United Home Loans, we use an automated system to get your Certificate of Eligibility within moments.

Who is eligible for the VA Loan?

There are basic eligibility requirements for veterans and service members, along with members of the Reserves, the National Guard and surviving spouses.

If Any of the Following are True You May Be Eligible for a VA Loan :
• You served 181 days during peacetime (Active Duty)
• You served 90 days during war time (Active Duty)
• You served 6 years in the Reserves or National Guard
• You are the spouse of a service member who died in the line of duty or because of a service-connected disability.

Verification of a veteran’s eligibility for a VA loan is through a COE, or Certificate of Eligibility. These can be obtained directly from the VA, which typically takes a few weeks. Another option is to contact a lender, who can obtain your COE far more quickly. At 1st United Home Loans we cab get your Certificate of Eligibility in minutes.

It’s important to remember that not everyone eligible for a VA loan ultimately secures one. Borrowers will still need to satisfy credit and underwriting standards, which are set by both the lender and the VA.

When purchasing a home, does the VA Loan allow for cash back options?

The VA has two major refinance programs. One of them, the Cash-Out Refinance, helps homeowners extract cash from their home’s equity while obtaining a lower interest rate.

What is the difference between eligibility and prequalification?

Not all borrowers who meet eligibility guidelines for a VA loan ultimately secures financing. That’s because they still have to satisfy credit and underwriting standards set by both the VA and the lender. Getting prequalified for a loan is a basic step. It can even be completed over the phone or online. This step provides veterans with an idea of purchasing power. It also lays the foundation for the credit and underwriting process. In the next step of the VA home loan process, veterans with sufficient credit scores move toward loan preapproval. This is a more formal stage desired by home sellers and real estate agents.

How do basic and bonus entitlements work?

Basic Allowance for Housing, formerly known as Basic Allowance for Quarters, is a key asset that can help service members qualify for and afford a VA mortgage. This monthly housing allowance can be counted as income, as long as it’s verifiably stable and likely to continue. This applies to other military allowances and forms of bonus pay. For lenders, it’s important to know that payments are reliable and consistent. Qualified borrowers can use BAH to cover some or all of their monthly mortgage payment.

How do I restore my entitlement once I pay off my previous VA Loan?

Veterans can seek a full restoration of their entitlement after paying off their VA loan. This often happens once a borrower sells their home and then uses the proceeds of the sale to pay off their original mortgage. At that time, the veteran’s previously used entitlement is no longer tied up in the original home. At this stage, Veterans must fill out a VA form and submit that document to the agency for full restoration.

What is 2nd Tier Entitlement?

Qualified borrowers have two layers of entitlement, which combine to create the VA guaranty. An additional layer of entitlement is helpful for those borrowers who have experienced foreclosures or other major problems with VA loans. With the second-tier entitlement, veterans who have defaulted on a VA loan may still purchase again. On a second-tier entitlement purchase, there’s a minimum loan amount of $144,000.

Can I use the VA Loan for a second home or rental properties?

No. The VA Loan is designed only for primary residences that are occupied by the owners of the properties.

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VA Loan Qualification

Who sets the VA Loan guidelines, the VA or my lender?

There are broad requirements and guidelines for military borrowers as set by the VA. There are no income requirements or credit requirements; the VA simply requires that borrowers represent a satisfactory credit risk.

Still, it’s VA lenders who ultimately issue the loans. That means they have their own unique requirements, especially regarding credit scores. Prospective borrowers should understand they have to satisfy both guidelines – those set by the VA and the ones set by agency approved lenders.

If I have bad credit, can I still get a VA Loan?

Absolutely, because every lender has its own minimums for credit scores. At 1st United Mortgage, we want anyone willing to serve our country to have the chance for home ownership. If your score is above 560, we can get you approved.

Can someone else sign on the loan with me?

Yes, veterans and service members may have a co-borrower, but there are certain restrictions. For a VA loan, that other person must be either a spouse or another veteran. Parents, friends and significant others who don’t fall under one of those two headings cannot be a co-borrower on a VA loan. Married veterans can obtain a VA loan on their own, but if they live in a community property state, their spouse’s active debt and income will be factored into the loan application.

What income can I use to qualify for a VA Loan?

VA-approved lenders require prospective borrowers verify enough steady income to meet their monthly expenses (including a new mortgage payment). Lenders want a minimum of two years of stable employment, and proof that income comes from the same employer and job type. Sources of verification for income include: • Base pay & allowances • Non-military employment • Retirement income • Self-Employment • Commissions • Rental income • A spouse’s income • Alimony/child care

Overtime work, part-time jobs, second jobs and bonuses, must still show the same two-year period of stability. Self-employed veterans or those who make a living in the building trades, doing seasonal work or working mostly on commission have additional paperwork requirements. Tax returns for the previous two years will be essential in verifying income.

How long do I have to wait after bankruptcy to get a VA Loan?

A bankruptcy or foreclosure doesn’t automatically disqualify you from securing a VA loan. More important is when the event occurred. Most likely, veterans will not get VA financing for approximately two years after a bankruptcy or foreclosure. There are some exceptions where the VA allows military members to participate in the program before that two-year mark.

However, the VA-approved lenders not the VA, issue these loans. Lenders have more stringent standards above those set by the VA, which means there’s almost no way for a borrower to secure financing for at least two years after bankruptcy.

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Rate And Loan Costs

What fees should I expect to pay for my VA Loan?

The VA caps fees that veterans pay in obtaining a VA loan. Typically, VA lenders charge approximately 1 percent for an origination fee, and another percent for administrative and other costs. Sellers can pay up to 6 percent of the VA loan amount in closing costs and concessions. The VA Funding Fee is one charge most VA borrowers can’t escape. The Funding Fee is a mandatory cost that helps keep the home loan program running, and borrowers with service-connected disabilities may receive an exemption from it.

What is the VA Funding Fee, and how do I calculate it?

The VA Funding Fee is a mandatory fee. It is applied to both purchase and refinance loans and helps keep the home loan program running. This fee is a percentage of the loan amount. It also changes depending on several factors, such as whether it’s a purchase or a refinance, how many VA loans you’ve had in the past and the type of military service. For the full breakdown and calculations, visit VAFundingFee.com.

How are rates for VA Loans determined?

Mortgage rates are shaped by a slew of factors. First, lenders set their rates based on what’s happening in the bond market. They also look at the greater financial landscape. That means interest rates change constantly, even multiple times per day. Because of this movement, it’s important to talk with your loan officer about when to lock in your rate. Just like other lending products, military members with excellent credit can secure better interest rates and loan terms than those with less sterling credit. Overall, VA loans have consistently lower rates than conventional loans.

Does my credit score affect my VA Loan rate?

Your credit score plays a significant role in your mortgage rate determination. Solid credit scores mean lower rates and better terms overall than those with low scores. in order to qualify for a government-backed loan, the VA only requires borrowers to verify they are a satisfactory credit risk.

VA approved lenders have their own, more stringent requirements and will closely review an applicant’s credit score. Now is the time to get a handle on your credit profile, catch up on outstanding debts and to be sure you are responsibly using credit. You want to be in the best position possible when initiating the home-buying process.

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VA Loan Guidelines

Can I borrow more than the value of my home with a VA loan?

Veterans can borrow up to the appraised value of the home with a VA purchase loan, plus costs and fees associated with the it. Homebuyers who want their home more energy efficient, they can add up to $6,000 in improvements via an EEM, or Energy Efficient Mortgage.

Through a VA Cash-Out Refinance, we help veterans and military families refinance up to a full 100 percent of their house value. This helps them to pay bills, renovate their home, pay for education or any other additional costs where they need cash.

Can I have more than one VA loan at a time?

A VA entitlement isn’t a one-time benefit and qualified borrowers can use it multiple times. Granted, most veterans will only have a single VA-backed mortgage at any given time. There are unique situations where veterans would have more than one VA loan due to relocation needs, such as deployments and/or employment.

VA loans are strictly for primary residences and cannot be used to purchase investment properties or businesses.

How complicated is VA financing?

At 1st United Mortgage, we’ve worked hard to become experts in the VA Loan industry. We’ve also worked hard to make the VA loan process as simple and streamlined as possible for our clients. Veterans and active duty personnel benefit from the less stringent requirements of the VA home loan program though they still have to meet basic financial and credit-related benchmarks. Once met, veterans receive a financial guaranty from the VA, and that guaranty gives lenders the confidence to issue no-down payment loans with great rates and terms.

When purchasing a home, does the VA Loan allow for cash back options?

The VA has two major refinance programs. One of them, the Cash-Out Refinance, helps homeowners extract cash from their home’s equity while obtaining a lower interest rate. We can help veterans refinance up to 100 percent of their home’s appraised value. Most lenders are currently capped at 90 percent. The process for obtaining a Cash-Out Refinance is similar to the process borrowers go through for a VA purchase loan. Veterans with a conventional or FHA mortgage can refinance into a VA loan using the Cash-Out program.

What is the maximum VA Home Loan?

There isn’t a maximum loan amount on a VA loan, but there is a maximum amount the VA will guaranty without some manner of down payment. That’s what industry people are referring to when they talk about VA loan limits. Right now, qualified borrowers can buy a house worth up to $417,000 with no money down across most of the country. In some high-cost areas, that limit can rise to more than $725,000.

Can I borrow extra money to make home improvements?

VA borrowers can add up to $6,000 to their loan earmarked for energy efficiency improvements. This is known as an energy efficiency mortgage, or EEM. With these unique loan products, homeowners can make select upgrades and repairs to the property for maximum energy efficiency. The money spent upfront on energy improvements can ultimately lower heating, cooling and other related energy costs for years to come. Them, those monthly savings can be funneled into dozens of other household necessities or even additional payments to the mortgage principal. Interested in an EEM? Consult with a lender to arrange for a home energy audit from a professional firm.

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VA Loan Basics

How do I get prequalified and what happens afterward?

You can start the application process today by speaking to one of our VA loan specialists. Our experienced team can prequalify borrowers in matter of minutes over the phone. We will gather some of your basic financial information and take a look at your credit score. You then receive our loan application packet, and this starts the path to preapproval. Preapproval is a more involved process and more detailed look at your finances and your ability to handle a mortgage and its associated costs.

What if I don’t have copies of my discharge paperwork?

It’s easy for paperwork to get lost over time, so borrowers shouldn’t worry if discharge documents or other important pieces of paper aren’t readily accessible. Still, VA lenders need official paperwork in order to process a loan, including the borrower’s Certificate of Eligibility, tax returns and other crucial documents. We can help veterans obtain fresh copies of these with no hassle. Another option? Borrowers can contact the VA and other entities directly to secure the paperwork themselves. Without paperwork, the loan process won’t necessarily derail, but it’s always best to take care of document needs quickly by wokring with a lender.

Can I pay off a VA Loan early?

Great news – VA loans have no prepayment policies. This means borrowers can pay off loans early without any penalty. This can be a significant benefit for homeowners who wish to lower interest costs over time. Paying an additional $50 or $100 a month toward a premium can shave off years, not to mention tens of thousands of dollars from a 30-year fixed-rate mortgage.

When is the VA Loan not my best option?

For the vast majority of veterans a VA loan is the best option. For active duty service members and military families, the VA loan represents the most flexible and powerful loan program on the market. Qualified borrowers are able to buy a home worth up to $417,000 (and more) with no down payment or out-of-pocket spending.

There are some cases when a VA loan isn’t the right fit. For veterans with significant cash reserves, i.e those who can cover a 20-percent down payment, conventional financing may make more sense. However, that isn’t the typical financial situation for most military borrowers. That’s why VA loans often make the most financial sense and allow veterans to get get the best use of their money.

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VA Refinancing

Can the VA Loan help me lower my monthly bills?

The VA home loan program offers two major refinance possibilities. One is the Interest Rate Reduction Refinance Loan, better known as a VA Streamline. This loan helps homeowners get into a lower-rate mortgage to reduce their monthly payment. The VA Streamlines has minimal hassle and paperwork. Also, the VA does not require appraisals or credit checks on Streamlines, though some lenders have recently made them mandatory. At 1st United Home Loans, we are still able to process some Streamlines without an appraisal. This is a tremendous benefit given the decline in home values across the country. Homeowners will have to pay closing costs on a VA Streamline, but these can be easily rolled into the overall loan amount, as can the $6,000 in energy efficiency improvements.

Can I refinance my home if I don’t currently have a VA Loan?

Veterans and active duty homeowners who qualify can refinance into a VA loan using the program’s cash-out refinance program. The process for obtaining a Cash-Out Refinance is similar to the process borrowers go through for a VA purchase loan, from the income verification and debt-to-income ratio to a home appraisal. Qualified homeowners with conventional or FHA mortgages do not have to take out cash when they refinance into a VA loan. But they are ineligible for the simpler VA Streamline program.

What types of homes can I buy with a VA Loan?

The vast majority of military buyers use their VA loan to purchase or refinance an existing single-family home. But veterans interested in purchasing a condo or building a home from the ground up can also utilize a VA loan. You can use a VA loan:

To purchase a residence that’s owned and occupied by the veteran.

To refinance an existing VA-guaranteed or direct loan in order to lower the current interest rate.

To refinance in order to take out cash.

To repair, alter or improve a residence owned by a veteran.

To simultaneously purchase and improve a home

To make energy-efficiency improvements in conjunction with a VA purchase or refinance loan.

To purchase up to four one-family residential units in a condo development approved by the VA. One of those four units must be used as the borrower’s primary residence.

To purchase a farm residence to be owned and occupied by the veteran. The property cannot be a working farm or an income-producing property.